tv Squawk on the Street CNBC March 8, 2017 9:00am-11:01am EST
>> 298 versus -- >> we don't drudge. >> yeah. >> one of our stories. >> got to wonder what it means for friday's jobs number. >> i always look forward to friday, but i'm absolutely looking forward to the jobs report. >> the jobs report this time around. melissa, thank you for being here. >> my pleasure. it was fun. >> great to see you. see you all back here tomorrow. right now it's time for "squawk on the street." ♪ good wednesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. a solid premarket to start the morning, but the real stories are one, a blowout adp number, 298,000, the third best month of the expansion. and two, david tepper on squawk this morning talking global growth at central banks he says need to start taking seriously. europe is relatively flat. the two-year, five-year yields
hitting multi-year highs this morning. roadmap begins with billionaire hedge fund manager david tepper not pulling any punches. what he's betting on, plus his take on trump, apple, snap and a lot more. >> a blowout jobs number from adp shows that businesses are booming. we're going to dig in on the report. >> and an op-ed this morning claiming the president is suffering from trade deficit disorder. the street is weighing in. we'll get the debate on trump's trade plan. some upbeat news ahead of friday's big jobs number. data out of adp shows private sector added 298,000 jobs in february. that is the most since december of 2015. and then on squawk appaloosa's david tepper offered his take on the markets. >> china, europe, japan, and us, are growing. the day that we had three republican houses, that was the day -- the president of two houses, that was a day there wasn't going to be another regulation put on the economy.
and that alone just releases animal spirits. nothing else happens, that releases animal spirits. and upticks were earnings and other things should be. >> he said on a multiple basis it's not that stocks are cheap here. it's just hard to be short. he really argues that aside from the french elections there's not much to get in the way this year unless we do something stupid on trade. >> joe kernen was saying, jim was watching and i think there was no disagreement. i found myself saying, wow, okay, yeah. i feel so good that tepper said the global growth, lately i've felt i'm the only guy out there with the global growth thesis. i'm doing it from bottom up listening from all the companies, he does it every which way. i like his scenario, basically says we can pause but things are getting better. there was a moment talked about the federal reserve and you know what, guys, get out of the way. things are getting better. it's okay.
you can say things are getting better. no one is going to hold it against you. tepper is a common sense kal guy. only a guy with total confidence who is that good is willing to admit a mistake on tv. he is the guest i most like to listen to of any of the people we put on. >> wide ranging of course as is typical with tepper and his knowledge of a lot of things, whether it's the french elections. >> yeah. >> or political goings on in italy, or the border adjustment tax debate here in this country. >> yeah. >> i thought it was interesting hearing him talk about that in particular on a morning where, again, people weighing in on their belief at least that the border adjustment tax will not be a part of tax reform. barclays this morning saying they don't think there's sufficient political support for comprehensive tax reform which includes that. but he brought up this idea of it being phased in, which we've heard about certainly over a period of time. and you get the dollar adjustment early. maybe not the full amount, but
early. and then that actually is a benefit. and so the winners become the losers, the losers become the winners early on. >> but that's how he put it. it's like you can't really navigate it. >> right. >> and that also is good. i love a guy who comes out and says, hey, listen, i know you want to navigate this. i know you want to be able to buy this, buy that, but you real le can't. again, shows confidence, shows a man who's been around for a long time, not afraid to be able to say you can't make a judgment. makes his judgments very, very particularly, not just kind of say i like this market, i don't like that market. he is so enjoyable. people at home, listen, this guy's the real deal. when i worked for him at goldman sachs, it was the real deal. he's an impressive smart man. and he's making a lot of what i regard as being non-sweeping conclusions. >> one of our viewers made the point this morning, tepper's unwillingness or inability to overthink macro is his greatest asset. >> yes. >> he doesn't drive himself crazy working at painting himself into mental corners.
>> that and his humility. they are the two things i like. i remember one time someone says, boy, does he come off as being super confident. i said are you kidding me? he just literally said i didn't do this right, i didn't do that right, i got that wrong, wish i got this right. you aren't used to hearing someone so forcefully willing to admit they didn't do something right. that's because he's gotten so much right he can do it. >> what do you make of his view of the fed? he's talking four hikes this year. >> i want four hikes. i think that's why you see the bank stocks up. we need four hikes. we got a lot of business we're doing. business around the world is good. four hikes would be obviously $3 billion more to j.p. morgan's bottom line. he did not say bank of america was cheap. he did say he wouldn't sell it here. if he does think four hikes, probably have to go back and buy some bank of america, which i think he'd be willing to do. a four hike scenario banks are going to be valued as growth stocks. bank of america does not deserve 12 multiple. they should be much, much
higher. had this debate the other day on halftime. love to talk about other shows. >> i notice that. i notice that. >> there was a fellow, o'leary saying he was short these. you can't short these bank stocks if the fed's going to raise four times. you can't. you'll be run over by a cat -- caterpillar truck like some of the people at caterpillar run -- >> yeah, that continues. potential conflict with the federal government over taxes in switzerland for caterpillar continues, but back to tepper. speaking of foreign nations, he was positive on europe as well. >> wasn't he? wow. >> very much so. which is a theme we've heard and you certainly have been talking about that for some time. also it being a key in terms of global growth. >> it is so hard doing business in europe right now, my wife and i are doing business in europe -- there's really no banking. they got to get the bank going again. the biggest risk is the french
election, but even then he said you have hollande as a socialist and didn't matter. i think he made the case for buying every european bank. really solid case. even deutsche bank. holy cow, yeah, deutsche bank. i wish he'd said to buy it. i wish he was on yesterday and said to buy adidas. >> we didn't get there. it was wide ranging but did not touch on adidas. we'll get to his views on apple, teva, snap and a lot more later on this morning. in the meantime, yale university's steven roach has harsh words about the president and trade. out saying trump is suffering from trade deficit disorder drawing from what he calls fear mongering from trade advisor peter navarro. added punishing china with tariffs is a misguided approach. something you could argue tepper doesn't necessarily disagree with. >> no, he doesn't. i think that tepper did come with real peace in his heart about the agenda.
the business agenda. >> yeah. >> and saying that he was all in for almost everything. where was the difference between him and trump on business? did you see any? it was obvious that he has other reservations about trump. >> he has a lot of reservations. >> he repeatedly said i'm not going to talk about. >> interestingly on this roach comment of course we had navarro write an op-ed the other day, also i think give a speech. steve liesman i think was reporting from there and the focus on the trade deficit, the opposition to that line of thinking centers on the idea that restoring a surplus. >> right. >> is not necessarily going to aid gdp growth as much as doing other things that will help labor productivity and labor growth, which are the keys to gdp growth. and there's certainly not necessarily a clear correlation between reversing a trade deficit, some of which by the way is just things like oil and this unending focus on it
certainly has been one part of criticism of the trump view held by navarro. >> and throw in the chinese imports last night plus 38. we got excited about china with all those imports because we think the government has mastered its plan to be able to get the consumer more going but may just end up being more steel coming there because their steel plants are so dirty. the main point is we shouldn't jump to the conclusions that a big trade deficit is the end -- is the worst part of our economy. but there are industries that are -- that have gone away. those are hard to bring back. they're trying. >> yeah. they may be trying. this debate's not ending any time soon with roach's comments today and a lot of other people. >> especially since it's so hard to get good intel on the evolution of policy. for example, larry kudlow last night tweets this, sources close to administration telling me commerce secretary wilbur ross now opposes border adjustment tax. very good news. later on, the secretary himself
responds to larry, not true. i've taken no position on border adjustment tax. so that remains opaque. >> geez, this is impossible. that's why tepper was so refreshing. he said stop trying to figure it out. go make money. that was tepper's view. it was like stop it. you can't fathom this stuff. so let's go buy some allergan. >> you like the balls in the air, right? >> yes. >> all this health care drama about gop opposition you don't mind? >> push it out. i'm fine. push it out. i don't want people to panic. i was studying 2011 last night, i don't know why. wife was asleep. studying 2011. 2011 was the year everyone fearful, fearful, fearful, government's dpoing going to bl up, s&p downgrades, bingo, had a buy. >> also had -- >> well, that was mr. idiot --
it's okay to call people out twice in a recession it's okay. we thought hoover was an idiot. it's okay. i look at the situation and i say to myself, well, i don't want 2011. i don't want that to be on my hands people saying get out, get out and the s&p does what it does and people say why did i get out? what was that? i remember i happen to be at the eagles practice when the s&p downgraded, treasury. and a bunch of players came to me and said do i have to sell everything. i said, no, i think you have to buy everything. and they said to me, no, i think you have to sell everything. and i was like they were bigger than i was, do what you want. sell it all. i mean, 267 pound guy who can do a 4.6 is telling me i should sell and i'm going to disagree with him on the field? >> well. >> once i ran away, start buying. >> it's about brain power, not necessarily brute force. >> except when you're in the gridiron. >> i suppose that's true. when it comes to border
adjustment tax, i already talked about it a few moments ago and it's not unimportant. tepper can say what he wants about how he views it and what should happen and how it should be phased in over five years and how the dollar will adjust, but tax reform overall has not been an insignificant contributor to our move up in equities, at least some believe. >> the hope for it. >> the hope for it. and when you hear about this debate about a border adjustment tax and wonder about the overall package of tax reform and its potential fate, you do have to consider that we may end up with some sort of tax cut at some point on the corporate rate, repatriation deal and that's all we're going to be able to get. >> when? how can they do all these thing sns. >> that will come later. all of this will come later. >> 2018? as they get closer to an election they need to say we did tax cuts. >> but what you replace border adjustment tax with given its key part of rates and revenue that tax reform plan is going to be a question. >> well, these are republicans. many of those republicans are like the old republicans.
they don't like to have a budget, blow up. those guys didn't go away. i think we have to go, david. i hear music endlessly in my ear. >> oh, really? >> that could be voices. could be joan of arc. >> kevin brady has his hands full this week that's for sure. when we come back hear what peter thiel said last night in houston. we'll give you a listen. also, new ceo of adidas, his outlook and strategy for taking on nike and under armour sara has that first on cnbc interview. look at the premarket, futures may not be doing a whole lot but the ten-year 2.57 is a high for the year. back in a minute.
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and one of the thoughts, one of my colleagues has had for a while and i'm starting to think may be right is one of the places we're have a bull market is we're now in a bull market in politics. and this is -- i'm not sure this is a good thing, but it is a fact that maybe politics is becoming more important, it's becoming more intense. >> right. >> the range of outcomes is becoming greater. and we're in a world in which there is a bull market in politics getting started. >> all right. nice reference of you, obviously. bull market in politics, the range of outcomes becoming greater. do markets like that? >> they -- i think they oddly do like that. because i think what happens is that there's a big distraction, you know, people are looking at politics. and underneath if the companies are doing well, you can actually make some money. i think a lot of people are focused on politics, but there's big money guys saying let them focus on politics but it's absolutely a bull market in
political talk. but there are earnings to focus on. peter, who used to be a regular guest of mine on kudlow and cramer. terrific guy. everybody's loaded with politics now. >> yeah, yeah, talking about bull markets though he did not do a good job running a hedge fund. good venture capitalist. >> i had him on for paypal. >> great investments as venture capitalist, not as a hedge fund manager. >> creator of unbelievable thing, paypal, but i do think there are two markets we have. there's a bull market in politics and there's a bull market in earnings. and the bull market in politics is obscuring the bull market in earnings. but it's on. my old friend dan yergin who i ran money for for years, delightful guy, has the best conference around. and that's a conference by the way that we haven't talked enough about. which basically is i think saying u.s. technology is keeping oil from rallying. because it's so good. so i don't know. i mean, peter's right, but you can't make money off of it. you have to be underneath it and looking at what's really doing
well. >> yes. you've been resolute about that whole notion that earnings are the bridge between now and whatever policy we get. >> but it's interesting bull market in politics in the sense that peter thiel, i know him as kind of a very successful entrepreneur, i'm sure people now slam me for saying that i know him and i liked him as an entrepreneur. and i just have to go back to your true what my daughter says, dad, stop. i'm not going to stop. just puts smiley faces on twitter. but there is a big backlash against electronics of late. and i want to be able to speak free freely without worrying someone's going to say he said good things about peter thiel. >> who by the way had one more bite about globalization and global supply chains. take a listen to that. >> i think the tide on globalization is just going out. >> really? >> it's going out on, you know, all these different dimensions. so if you have movement of people. i think immigration is getting more restrictive, not just in the u.s. but throughout the western world. i think movement of trade, i
think there's big headwinds there through goods, movement through people, movement through goods. movement of capital, which is mainly through banks. banks are going to get more regulated. and even movement through information where i think there may be some headwinds for -- >> the internet designed to survive a nuclear war but even so i think there are sort of a lot of regulatory challenges silicon valley will be facing from western europe and elsewhere in the years ahead. so i think the tide on globalization is just going out in a pretty big way. >> tide is going out in a pretty big way. >> yeah. neil ferguson just wrote a piece very similar that i read over the weekend. great professor at harvard. i think the germans are going to fight this tide. when they hear nationalist and they think about what happened in the '30s and that's why i think germany's going to have to spend more money. but i do believe that, look,
globalism, our president is anti-global. it's pretty straightforward. >> he is. >> he thinks globalization is a curse word, synonym for you take our jobs and send us your pollution. >> yep. >> we're going to have a lot of pollution to send other places now. >> the epa, scott pruitt on tomorrow. favorite epa administrator. >> who's going to be on squawk tomorrow. >> energy protection administration. >> let's get cramer's mad dash after the break, count down to the opening bell, take another look at the premarket which has strengthened just a bit. back after a break.
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dead. you better start remembering her name, jane elvers. actually had a tossup with activist. ceo of children's place, she doesn't get nearly enough credit because, david, comps 6.9, gigantic guide up, dividend goes from 20 cents to 40 cents, people thought it would only be 25. children's clothes, how about the fact that she knows what to sell? her merchandise is correctly priced. this is the mall story. this is the great american mall story. and you know what, as we get further through this quarter we realize burlington was good, children's place was good, tjx was good. >> so you're confusing people because we sit here talking about the mall and mall traffic being down dramatically. >> right. >> which it is. >> right. >> and so then you're saying, well, but these are not dead. >> well, look, that's a really good point. >> less traffic to the mall is
not good for them. >> that's a really good point. i guess i'm just saying that there's some operators that are transcending the difficulties, how about that? jane is one of them. burlington is stand alone, not really in the mall. but of the actual mall players when you go around the racetrack, this is the one. >> and having a very strong day of course. >> and jane does not promote. >> does not promote. >> does not promote. >> got it. opening bell a few moments away. stay with us on "squawk on the street."
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january revised higher. that's going to be the biggest beat versus expectations since december of '11 and the third best month of expansion, goods producing. barn burner of a number. >> yeah, i mean, i just -- i don't want to even come in friday for fear that how many different people say the fed's behind the curve. just every guest will say the fed's behind the curve. which is why i've been saying the fed's got to move, got to muf, got to move. but you will hear the analyst say, don't be freaked out about it. we're all going to stipulate the fed can play catch up here. they can do four hikes and be fine. don't be freaked out when people say the fed really blew it. it's too early to say that. >> would you imagine the word gradual comes out of this statement this month? >> i think they're not going to say precipitous, but i think they will say more gradual we have to move, we will move. there's no reason gradual because that's going to start scaring people. gradual flips from being a soothing word to being a
worrisome word. >> let's get to the opening bell here. the s&p at the bottom of your screen. at the big board it is chevron today celebrating its 95th listing anniversary. sean watson, ceo, doing the honors. over at the nasdaq, factset, provider of analytical and financial information. one name we'll look at the open is snap rebounding a bit, about 3%. tepper did talk about getting in on the deal and levels at which he would buy or sell. take a listen. >> i'm not jumping through the hoop to buy the 2180, but should it go down closer to the original offer price, i would love to buy the stock there. i'm a believer in the company. it's a valuation question to me. wherein to me i'm in nowhere land of valuation right here. you know, you can call that, you
know, 19 to 23 or whatever, 24, that you don't touch your position. up near 30 it's too high for right now. one day it may be 30. one day it may be 100. but today it's too high at 30. >> you guys like rehearse? i mean he's echoing a lot of things you said. >> i'm honored if that's the case. he's a real smart guy. but that's kind of exactly how i feel. and i just feel like there is a value here. it's not a worthless company by any means. it really is a must-buy. when i speak with the consumer product companies, they all say listening we're sampling, we think it's going to be good for us. and therefore it is worth something. it did get overheated. and i'm with him. comes back to 17 i'm going to say, listen, you got to watch what this company's going to do. it's going to reinvent itself as the mtv for younger people and advertisers really want an mtv to throw money at. >> spiegel by the way getting a bonus for taking the company public.
recode this morning reporting 3% of shares out is about $800 million bonus at 21. pretty good. >> wow. really good. >> that is. yeah. particularly for a company that you founded and run, conceivably you would benefit regardless from taking it public beyond needing an additional bonus. >> but they can't vote. >> nope, they got no vote. they have no say whatsoever. people don't seem to care about the governance or lack of governance at snap. by the way, we pointed outd, you don't really have a lot of governance at google or facebook, but you have some appearance there of having some power because there are voting shares available. in this case they're not even available. >> none. hey, guys, children's place up 13. i like it. now i feel bad. i said it was the only store in the mall people are taking up like it's the only store in the
mall. >> tell me to remember something, i got it. >> you. you. >> but jim, we keep talking about the mall. >> how about urban today? >> yeah. >> oh, my god, that was such a bummer. oh, geez. >> that's going to be down 8%. that's back to february of last year. >> gross margins are going to go down because of increased delivery in logistic expenses -- in other words, still one more company not doing well like target does all this direct to consumer and hurts the regular business. these guy toos as too. the omni channel, unless you're amazon, i mean wow. amazon has figured it out, everyone is still trying to figure it out. isn't that amazing? everyone is still trying to figure out how to get something from them to your house. >> i think my first amazon experience i guess our coffee pot broke in the morning, one was ordered and by the time we got home it was there.
>> really? >> yeah. from amazon. >> when did that happen? >> yesterday. >> that's incredible. >> same day. same day. that's like magic. >> that is magic. i don't know what to say. i'm sitting here thinking about target and what they would do. >> i mean, you go to work. you have your day, you come home, you got your new coffee pot. >> here's what's interesting, when he starts doing things like shopping, look what he has -- >> that's the pop. >> i had nothing to do with any of it. any of it. i was just an observer. i was told that the coffee pot was broken. i got home and there was a new one. >> david, you just -- shows me if they unleashed you. >> i was aware of it. >> you're going to children's place this saturday with me. >> i like amazon. >> if you have a dog, we'll go to pet stores they're in the mall now because you can't -- because amazon hasn't figured out how to put them in an assembly line. >> right. >> the cryogenic, freeze them and unfreeze them. >> no money left to do shopping because of pets.
>> that's why i think that smuckers coming back. price war in food seems to have ended. >> jim, to your earlier point, it's going to be all about financials today. the dow is j.p. morgan, goldman, am exa am ex and travelers. >> we started only three hikes because of gradual, we take gradual out, add $3 billion back for j.p. morgan and bank of america and we get stocks that looked historically expensive on book value and net interest margin come historically cheap on earnings. that is the rerating occurring in front of us and it is extraordinary. extraordinary rerating because you get a company like citi, which is below book, that could earn a huge amount of money, and nobody likes it. then suddenly when they start printing numbers, someone's going to say, hey, citi, maybe they can earn $6. maybe it's only at ten times earnings. we haven't looked at a bank on an earnings basis since 2005.
2005. 2006 we thought was overdone because of housing. 2005 is the latest -- 12 years ago we valued banks on earnings. >> morgan stanley is at $47. stock's up over 11% this morning. >> well, you know why. >> i do know why. >> go ahead, say it. >> but i wonder. >> david, it sells at 14 times earnings. it's really going to sell at 13 times earnings if we get four rate hikes. it's got a pretty good balance sheet. >> 14 times earnings is not an unsubstantial multiple for a financial. >> you don't think that should sell at 14? >> i'm just saying. >> it's a growth stock. remember last time we were here it didn't own one-third of the country. remember they let all these banks -- remember immelt was rolling over in his grave because they let all these banks merge. >> right here. >> he's right here. >> we can go check to see which side he's on. >> he's moving around a lot. i just watched insider sales from morgan stanley. i got to believe some of those guys are hitting the bit at 47. >> i checked out hampton real estate situation this weekend, a lot of places for sale, prices
down year over year. how is that possible with these bonuses? what are they doing? >> it's not bonuses, it's deferred comp that's coming due now and it's gone up well more than anything e any of the people who received it five years ago, four years ago, three years ago, ever thought it would. >> you're right. >> now the compensation plan to align incentive and risk more closely with employee pay may have worked, but they're getting well paid again. >> good point. >> very well paid because of course the stocks have moved up dramatically over the last four months. >> but as for citi, it's a little bit hard to see on the chart right here, but it looks like you got to go back to '09 now. >> yeah, my travel trust has a huge position in citi. really believe what michael is doing. i felt buying in the 40s we were like the two, me and mike, we were like -- mike and me, we like citi. and now people are starting to warm up to it. citi by the way big beneficiary in the costco switch over to american express. citi still $2 below book, nobody
seems to care until it breaks out and everyone saying wait a second a stock most behind the market of any. so it also still has a good international franchise. just pointing it out. i think corbette is doing good. just like jane at children's place. they're doing a good job. never hear about it. maybe they like their wives and husbands when they saty it. there. then i add to the course. is that okay? >> it's fine. you feel you need to promote the unpromoted. >> yeah. >> unsung. >> you got thoughts on cat? >> oh, so i'm going over cat. i'm doing everything i can to try to figure out which agencies versus an incredible note yesterday by con expo day one by bmo, we also had razo do a good note, two notes about how numbers are too low for cat. revenue numbers are too low for cat. this stock would have been up three if it were not for
caterpillars accused report of fraud. so this is a battle of is it fraud and it was doug oberhelman, where did he go? what is going on? versus numbers that are higher. this is a true battleground today. and i don't know the answer, but i know caterpillar's numbers are too low for 2018 and maybe for even second half of 2017. ain't that something? >> you're joining us on the story itself, the accusations are essentially about let's call $2.5 billion over a 13-year period moved to a swiss subsidiary that was therefore they avoided taxes on and the question was there a business purpose behind it. that seemed to be why they were rated last week. >> right. >> continued investigation of that. of course if we ever got tax reform, this is the reason you need it. none of this stuff would happen. >> no, just a way to get around the aversion.
interesting thing you don't know whether the justice department is driving it, which in that case could be criminal, try to put people in jail. irs, the law of irs is you're guilty until proven innocent makes a really high burden on yo your part to get out of jail. but this is really bad. what this reads like is the government, whichever entity, doesn't believe caterpillar's cooperating as much as caterpillar says it's cooperating. that against the idea that the revenues are too low, wow, what a tug of war. >> well, the president is going to have a meeting today about infrastructure with richard lafrack and according to reuters tesla's elon musk making what would be his third trip to the white house. >> man. fly me to the moon. >> he's on infrastructure got that hyperloop. >> yeah. >> rick perry, energy secretary, elaine chao will be there. >> musk wants to put in northwest colorado a gigantic solar field that will provide all the electricity for our
country. one day. that's what he wants. >> oh, really? he also wants the hyper -- well, he wants others to develop a hyperloop that will send us in tubes. >> but the upstate new york plant, he's putting jobs there. >> yes. >> he's a job creator. >> in buffalo. >> yes. he is a jobs creator. and in places, buffalo, yes. they should get some jobs. >> so with all of that financials leading but dow's up about eight points. let's get to courtney reagan on the floor. >> good morning to you, carl. so we have a start of a market day that's a little slow but still we are higher after that adp report was much stronger than expected. and that just is another sign pointing to go for that rate hike come next week. we do still have the jobs report on friday of course, which could be that final punctuation. i want to point out that the s&p is just marginally positive, but we have not seen a downward move of 1% or more in the s&p 500 for more than 100 trading days, not since october 11th. that's fairly phenomenal. something i don't believe has ever happened before. now, the dollar strengthened
this morning on the back of the adp report, the ten-year yield surged to its highest since december. gold and crude both hitting lowest levels in a month or more. we did have that report from the epi showing a rise in inventory and that's guiding the price of oil. we'll get more government inventory numbers out today at 10:30. we're going to watch caterpillar as you mentioned because of the "new york times" article saying that the government is looking into some fraud, some tax accounting fraud there. so we got to watch that because it is a dow component. but if we do a sector sort, of course banks among the winners today. that's what you might expect when we're looking for that rate hike. we've got bank of america, citi, morgan stanley, j.p. morgan all up more than a percent or more on those expectations. health care just turning slightly, slightly positive, but let's call it flat. and then energy is a big laggard today. and that's not a surprise because of the price of crude oil and also we know that it is cera week down in houston. the probability of the rate hike
for fed meeting is increased upwards of 80% or more. if you're looking to invest ahead of next week's hike, our partners at kensho note that since 1994 there've been 33 fed funds rate hikes. and in the week before these hikes, which is this week, the top performing sectors are financials, banks, insurance and health care and health care equipment. so those are just some tips if you're looking to see what historically has been driven ahead of those fed rate hikes. now, lastly i just want to take a look at the retail divergence. we cannot paint retail with one broad brush as jim always tells us, children's place seeing a very big earnings beat. disappointing revenue, but stronger comps. they're also doubling the dividend. shares up almost 17%. that's quite a move. and then you've got urban outfitters. so these earnings miss by a penny, revenue slightly below forecast, flat comps. actually at least eight price target cuts for urban outfitters. somewhat surprising to me only because we did get a pre-announcement from the company earlier in february, so
some pretty huge moves after the company more or less painted the picture of what that quarter looked like for us ahead of time, carl. >> courtney, thank you very much. courtney reagan. let's get to the bond pits as well. rick santelli at the cme group in chicago. hey, rick. >> wow, what a day, what a day. we all know that unemployment various reports they're key for markets. we also know to our central banks. of course we have both of those in the form of the ecb coming tomorrow and friday's employment report after adp's best numbers since april of 2014. this is huge. we're getting to market extremes. what happens? well, if you look at our two-year, june of 2009 last time we were at 1.35, 1.36. let's hold that date and look at a ten. wow, the curve is certainly moved a lot, has it not? even though rates are getting close to that 2.60, 2.62 area, it's huge. it's like the toe keeper
potentially testing 3%. we have to watch this one closely especially on a closing basis. hey, a one year of bunds, certainly it's rates going up but not in a super aggressive way. but the relationship it has with tens we've been monitoring this. it was hovering around 2.14 to 2.15, which was basically in the middle of that range. you see the high and the low there. the fact that it's breaking out to the upside couldn't be more key to pay attention to. hey, when the ecb basically is making it so negative rates will always find a greater fool to buy it from the last fool and yet the ecb and all central banks hold the really good paper as tomorrow's ecb meeting approaches and the cutback of quantitative easing, you really need to watch some of these southern european securities. this is so relevant. so let's look at a few real quickly. let's look at spain, that's from january of 2015. it's on the move. let's hold that date. let's look at french. definitely much lower than the yield in spain close to 1.80,
but it's still still moving up nonetheless. look at portugal, highest yield since about march of 2014, if my memory serves me. getting darn close to 4%. and while all this is going on, the fed has been most nervous. boy, you don't want to raise rates too quickly because of the dollar index. now, i understand dollar index has a lot of bullish things to contend with. border adjustment tax, yes, the fed actually delivering on what it should be doing all along for years rising rates. but as it sits now as the crow flies we're still one-fifth of a cent negative on the year while rates of course are up 44, 54, up a dozen basis points in tens. and obviously equities are flying. dollar index may be your key to everything else taking out the top of their ranges. david, jim, carl, back to you. >> all right, rick, talk to you in a little while. >> the three mus ke tiers. >> thank you, rick santelli. when we come back, stephen roach
in an op-ed says the president is suffering from what he calls trade deficit disorder. dow's up 22. financials leading the charge. we're back after a break. whether it's bringing cutting-edge wifi to 35,000 fans... or keeping a hotel's guests connected. businesses count on communication, and communication counts on centurylink.
i really like anthem because i think the repeal and replace is not as feared. >> the main line repeal and replace is not as negative for these stocks. >> it's not in the best interest of either canada or the united states to disrupt what is now a balanced trade position. >> we're just trying to deal with the marginal benefit to the u.s. of correcting some of the original flaws in nafta. >> our top trade this hour, the state of the trump rally. stocks in the red.
♪ harvard's inviting mark zuckerberg to speak at this year's commencement. also getting advice from a former harvard commencement speaker. listen to that. >> they know we didn't actually graduate, right? >> oh, that is the best part. they actually give you a degree. >> you don't even have to go to class? >> no, no, you just put that degree on your resume and it looks great. >> can you help me figure out what i'm going to say? >> yeah, we should work on it together. let's go get some more snacks. >> so you get to wear the hat and everything? >> two of the most famous dropouts ever from that school. >> he was in my class, bill. yeah, he dropped out.
i didn't get my diploma that year either reasons dispute with the school, i got it later. he got it, i didn't. that was something. >> that's a good speaker. >> best ever. >> there's been a lot of discussion about facebook live this week and the degree to which maybe they innovated too quickly. disappointed by some of the content. >> i think everyone's struggling. i think they're struggling, but it's a pot of gold. in the end. i think in the same way by the way that youtube for years we said when is youtube going to get it together. and then one day they get it together. and now i just hear nothing but good things about youtube and the channel. >> yeah. "the wall street journal" story yesterday was interesting because the company clearly from the story in the journal is capable of doing things quickly. >> yes. >> still innovating its scale, which of course people like to see and talk about and
technology is being one of the key drivers of growth. >> well, one of the -- i mean, i don't want to talk too much on education and, you know, how important it is because we just saw gates dropped out. but people involved in facebook live and facebook -- it's like they assembled the team of the smartest people in the world. sometimes i know resumes don't mean that much, but they're going to figure it out. they're going to figure it out. they're very bright. >> actually, the president this morning meets with lauren powell jobs, steve jobs' widow, about to a large degree tech and education. >> good call. >> some argue gotten short shift because the agenda's so packed. >> my travel trust owns facebook, most impressive people i've ever met in business. most. >> we'll get stop trading with jim in just a moment. know you have a dedicated advisor and team who understand where you come from know you can craft an investment plan as strong as your values ♪
time for cramer and stop trading. >> okay. there's a note out by goldman today i think people should look at because what about happens when you get too excited, this is a piece about shake shack, a continuation of a sell saying people are just really still not realizing the challenges, whether it be labor, the build to suit shift is different. they don't like necessarily to see traffic headwinds. outside of new york there's not a lot of excitement about it.
one of the things i haven't pointed out is i happen to love shake shack. i know people say, hey, i love shake shap, i love snap, i should buy shake shack, i should buy snap, you should do homework and this is a piece to say still not too late to sell shack. hard piece. >> yeah, tough. what's on mad tonight? >> i have a company calling avangrid, i like these companies, i like yield. it's a 4% yield with growth. people forget even though bonds i know interest rates going higher that there is a desire to have fixed income among our viewers' portfolios. and i like fixed income with growth and this is one of them. wow, a lot of coverage of nothing. >> three points. it's a long day ahead. >> no, i mean, come on, tepper was very significant. >> yep. >> and i don't take offense to the turrets, people who have turrets i feel badly and i don't think that was right -- >> you didn't say it. he said it. >> what? no, he did. i didn't like that.
i don't make fun of people who have an illness. you just don't do that. >> well said, jim. we'll see you tonight 6:00 p.m. eastern time. when we come back, stephen roach says the president suffers from trade deficit disorder, the former chairman of morgan stanley asia, we'll explain. sara's interview with new ceo of adidas, i see larry kudlow making way to set. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t. e*trade's powerful trading tools, give you access to in-depth analysis, and a team of experienced traders ready to help if you need it. it's like having the power of a trading floor,
termites. we're on the move. hey rick, all good? oh ya, we're good! we're good. terminix. defenders of home. what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley
♪ good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, david faber at post nine of the new york stock exchange. markets trying to avoid its first three-day loss since january, but it's all about financials and yields today on that strong adp number, on tepper on squawk and a lot more. >> our roadmap for the hour begins with the market and the david tepper exclusive interview. long stocks, short bonds. what he's buying and what he's ignoring. >> in an op-ed this morning says the president is suffering from trade deficit disorder, the offer former chairman of morgan stanley asia stephen roach is with us. >> plus, adidas shares hitting a record high after reporting increased sales and profit targets. you'll hear from the ceo.
but first, we've got breaking economic data crossing the tape. let's get straight out to chicago and rick santelli. rick. >> well, thank you. we have our final read on wholesale inventories preliminary read minus 0.1 gets tossed out. number down 0.2, that is the smallest month over month change since february of 2016. next let's look at sales. down 0.1. smallest month over month change since july of 2016. of course we are continuing to test a very significant technical level between 2.60 and 2.62 in tens. haven't quite gotten the 2.60 handle but everyone continues to monitor. carl and the gang, back to you. >> rick, thank you very much. the president planning to meet with a group of infrastructure business leaders at the white house later today.
our ylam mui is there. >> big name out there, elon musk, as you remember he got pushback when he joined the president's economic advisory council, but he will be here this afternoon talking to the president about infrastructure, some of the other names on the list include steven routh as wel as richard lafrak and lynn scarlett as well as other names, what strikes me about the people who are coming today is that they're not really focused on the logistics of building roads or bridges or highways, but they're focused on the financing of those projects. president trump has proposed a trillion dollar infrastructure package on the campaign trail. he suggested that we could meet that amount by using $167 billion in government spending.
use that to leverage that trillion dollars in investment. there could be some big tax credits involved in that as well. he also suggested using repatriated earnings to pay for infrastructure projects going forward. but, you know, what i'm hearing on capitol hill is there's a lot of skepticism over whether or not this deal can actually get done going forward. i talked to senator john barrasso of wyoming yesterday on the hill he said he's worried public-private partnerships could leave rural communities behind and senator rubio of florida told me he's worried about exploding the debt. so big question on how to pay for infrastructure, you know, at a time when the president is also talking about massive tax cuts, also talking about health care reform. this is one more item to add to the agenda. >> ylan, thank you for that. we'll come back to you latder in the morning. trade, border tax, health care reform all talking points this morning as house republicans move ahead with legislation to repeal and replace obamacare. joining us this morning former
new jersey congressman rob andrews, now president of the health transformation alliance. it's worth noting that president obama called him, quote, an original author of the affordable care act, with us at post nine this morning cnbc contributor l contributor larry kudlow, guys, good to see you both. >> good morning. >> a lot to get to whether it's health care, border adjustments, larry. >> tweets. >> we talked earlier this morning about the back and forth you and secretary. >> commerce secretary, yeah. well, look, in summary a very good source, i'm going to underscore that, very good source close to the administration told me that secretary ross is leaning against the border tax. leaning against the border tax. he may be opposed to it already, but he's moving away from it. by the way, we saw that on cnbc. interviews last week and yesterday you can see. the way i put it is secretary ross is running as far as he can
from peter navarro. that's the way i see it. peter navarro, the rampant insane protectionist in the trump white house. >> even though the narrative was written during the transition that they were peas in a pod. >> peas in a pod. they wrote that awful paper on trade tariffs. awful, awful. wilbur ross way too smart for that. great businessman. so anyway, he tweeted me back, i was honored. he said he's made no decision yet. he didn't say i'm for, didn't say i'm leaning, i think he's moving away. ooimg going to stay with my source. wilbur is an honorable guy, i take him at his word, i think the b.a.t. just lost an important ally in the white house. that's my view. >> what's the score now on those who are supporting it and those who aren't inside the white house? because you were on, what, last week saying that the president was leaning towards supporting it. >> yes. now, it looks like the chess board is changing for the better, in my opinion, because i don't want the border tax. so if i move wilbur ross into
the anti, camp, he says he's not there yet, fine. but i'm going to move him into the anti camp, join steven mnuchin at treasury, he will join gary cohn at the nec. that's good. that's a big vote in favor if my lineup is correct. i have not heard mr. trump come out on this with anything recently, i regard that as good. so things look better to me for a non-b.a.t. and that means get that out of the business tax cuts, get it out. right now just shoot it. and get the business tax reform done as soon as possible. >> but does that mean we could get revenue newutral tax reform without increasing the deficit? >> all depends on the kind of pencil you have and how good an eraser. >> depends on gdp growth. suddenly you don't care about generating deficits. >> you're right, my friend. between economic growth, economic growth is going to do the trick, those business tax cuts are going to pay for
themselves inside of four or five years. that's my view. and by the way, you could cut spending, right? trump's budget says going to have $10 billion in spending cuts -- >> that's going to be entitlements, larry. where else are you going to get it? >> entitlements don't trouble me. we'll deal with entitlements later. that's a mana. >> let's bring in rob. rob, i invite you to weigh in on border adjustment, but i assume you're going to comment on what's being painted as widespread opposition to the new health care bill. >> yeah, you know, i think it's very hard to pass a health care bill, and i have a lot of respect for my former colleagues in the congress trying to do it, the hta, which you mentioned earlier, we're really all about working in the private sector to produce better health outcomes and better value for people complimenting what the government does but frankly agnostic to what the government does. this is a private sector effort to deliver better care and
better value. >> larry. >> well, you know, look, i agree with rob in terms of private sector stuff. i think that's really important. private sector collapsed on these exchanges. now, the bill that they put through is not perfect, okay. nothing in life is perfect. but i think the good should not be the enemy of the perfect in this case. and i think they racked up a pretty good bill. thinking get rid of the mandates, that's so huge. so huge, they're going to get rid of the tax increases. that's good for economic growth. it's also good for health care. much more choice and competition. you know what's interesting, i asked this of rob andrews, who's a friend and appeared on my show a lot, you know, rob, a lot of people said even last week that the republicans would not -- they'd have a repeal, but they wouldn't have a replace. now, you may not agree with the replace, but the replace is there. and i think it's pretty decent. so that's a surprise, isn't it, politically? >> it is a surprise. i think the administration and the congressional leadership deserves praise for not trying to replace something with
nothing. again, our view, larry, of the 38 companies we have in the hta is that we respect the process in washington but we're moving ahead with our own process. which is driven by real value. it is by taking better care of the people that take care of us. put it to you this way, we certainly would welcome a discount on amputations, but we want fewer amputations. we want more type 2 diabetics to be healthier so they don't have the amputations. i hope that what comes out of washington compliments that because that's what we're up to. >> can i just add to this? refundable tax credit is regarded by some of the conservatives as a brand new entitlement forever and will grow. i agree there's risk there. i just don't see how you couldn't put it in. i don't see how. however, my criticism of the refundable tax credit and the tax credits in general is it's too generous for the upper
income people and not generous enough for the lower income people. i think that should be changed. i think it can be changed. and my second point here is, healthy people should not have the same costs as sick people. all right. now, ryan did a good thing creating these risk pools, all right, for the sick people. that's good. he put a lot extra $10 billion that may or may not be enough. what i'm saying is the u.s. government, federal and state, should take care of the ill people. just take care of them. if that means a spending subsidy, i'm fine with that, okay. however, that will open the way for healthy people to get lower premiums so they're not shouldering all that burden. >> yep. >> i'd like to see that spelled out a little more. >> agreeing with what larry said, as employer sponsored health care strengthens, there are fewer people for the government to take care of at all. so our objective is to make it more attractive for more
employers to do a better job of delivering better value for their employees and retirees which takes the pressure off of the federal budget, as larry just talked about. >> i was just going to ask you, rob, on that point just based on your expertise how you think this is going to score. because some of the proponents and some of those that disagree i think will have much better arguments once they find out how much it's going to cost, how many people whether more or fewer will actually be insured in this republican plan. >> i actually think it's going to score as costing a little lower than people think because frankly the takeup rate will probably be lower. in other words, the subsidies are pretty modest, these tax credits are pretty modest relative to the price of insurance. so probably what will happen is cbo will say that the number of people who will opt for this will be lower than what people think therefore the cost of the bill will be lower than what people think. and hopefully the majority will retain its present position,
which is not touching the tax exclusion for employee health benefits. that's what i think will happen. >> what do you think of the cadillac tax, rob? they didn't touch it. they extended it. they extended it. >> yeah. i think the cadillac tax is a model t, larry. >> i know. >> i hope what happens is it dies the death it deserves, whether it's 2025 or thereafter. >> i'm calling it the northern industrial states tax. that's really -- we're talking politics here, aren't we, sir? >> there's something to be said for that. that is true. look, taxing employer health care will give you less of it. and i think that's just a bad idea across the board. and i'm encouraged -- we're encouraged that the majority bill has dropped that tax provision they were talking about earlier. >> by the way, one other area of contention, there are going to be votes on the floor of the house and the senate. >> of course. >> is medicaid. again, a lot of the conservatives are arguing that medicaid is too much of it, it's
grown too fast and it's going to be too generous going forward. now, paul ryan and kevin brady have a program, as you probably know, trying to block grant it and give it to the states with a lot of flexibility. i think that's quite sensible, but i think the numbers here, the sheer raw numbers, medicaid is huge. that's been the bulk of obamacare is medicaid. the question is what do you do about that. that's going to be a tough fight. >> yeah, we're going to hear from speaker -- >> what we would say again is incent employers to provide high quality health care and the pressure off medicaid begins to lessen. we have members in the retail industry, in the service/hospitality industry, and if it were not for their employers stepping forward through the hta and providing high value, high quality health care, they would be in medicaid, a lot of those folks. so employers, i think, over the years have shown a propensity to achieve success in health care. we at the hta want to perpetuate that.
>> i just think it's so huge. getting rid of the mandates is huge, okay. and getting rid of the taxes is huge. you're talking about investment taxes, equipment taxes, medical whatever it's called equipment taxes, talking about prescription drug taxes, talking about over-the-counter, medical devices, that's what i was trying to say before, it's pro growth. i think it's really going to help health care with more competition. i think it's terrific. opens many doors to better delivery. >> the speaker is speaking as we're all here right now. so we're going to take a break and see if we get anything from him on the other side of that. rob, larry, please come back soon. good to see you. >> thanks, rob. >> thanks a lot. good to see you again, larry. >> also coming up, president trump suffering from trade deficit disorder, that's according to former chairman of morgan stanley asia, stephen roach. he will be joining us live this hour. plus, shares of adidas hitting a record high up another 8% today after announcing a big boost in sales and profit targets. we'll hear from the ceo straight ahead. the dow's down now 23 points. "squawk on the street" will be
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we are getting breaking headlines out of samsung on its u.s. investment. seema mody had details for us. >> hi, sara. dow jones quoting sources saying samsung is planning a major investment in the u.s. home appliance production space with a total investment of roughly $300 million, at least five states have had discussions with samsung and their interest in bringing some of this production back to the u.s. is influenced by trump's election. again, that's according to this report. this report also says that some production moving from mexico back to the u.s. and this move could generate around 500 jobs. keep in mind this also follows a tweet from president trump back in late february where he did say -- or he did thank samsung. looking at shares at this point unchanged. >> it is the trendy thing to do. seema, thank you. speaking of investment stocks are down now for a third day in a row, s&p's pretty flat. dow's down about 19 points ahead of this friday's big jobs
report. appaloosa's david tepper joined "squawk box" earlier. here's what he had to say about the markets. >> we're more long u.s. stocks. but the bigger bet is -- listen, it's all kind of same sort of bet. if we're short u.s. bonds, we're betting on a stronger economy here. >> right. >> okay. that's the bet. so we're betting on strength one way or another here and strength around the world. in one way or another. and like i said the only thing that's on the horizon, different things can happen, hopefully nothing happens political, but different things can happen in, you know, france, but once you get through there, there's nothing else on the year. you kind of have smooth sailing. >> he also commented on the federal reserve ahead of next week's meeting. >> take away the punch bowl. take away the cocaine. take away the heroin. put the marijuana in the drawer. the fed has to get serious now. >> taking those drug analogies with qe and stimulus to a new
level with the punch bowl. but talk about strength, guys, tepper was commenting on the u.s. economy and the global economy, that adp report we have yet to hit private sector job growth 298,000, that was the most in three years, bodes well for friday's big employment report. the economic data is turning up. and that confidence boost we saw in the surveys is really starting to show up in the real data. >> we'll see again on friday of course. >> goldman ups number on friday up 215, up by 25k. whether it's jobs, inflation indices, composite isms, it's happening all around the world. that was tepper's broader point. >> i think it was also interesting that he noted that it's hard to short this market. which it certainly feels that way even on the pullbacks they're small, financials are leading the charge again. i wonder, david, how widespread of a view that is in the hedge fund community whether they're looking to valuations which are certainly not cheap by any means but hard to find -- he couldn't find a real negative catalyst exempt the french election
potentially. >> po ten lshltentially. yeah, it is difficult to sort of stay short at the same time i'm not sure a lot of funds have been fully invested. kind of waiting for that pullback that hasn't really come. >> when we come back this morning, the new ceo of adidas is going to talk to sara, talk about profits, the president and how he's taking on competition from under armour and nike. under armour by the way today another 52-week low. "squawk on the street" will be right back. hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab. a modern approach to wealth management.
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earlier this morning i spoke to adidas' ceo kasper rorsted, raising company's forecast profit should rise 20% to 22% a year on average through 2020 up from 15% earlier. and the u.s. is a bright spot for business and investment. shares as you can see surging to a record high up another 9%. at a time when nike and under armour's growth is slowing down along with their stock prices. so i asked adidas' ceo just how much market share he's taking right now from his top two competitors in the u.s. >> in our footwear, we double our footwear share in 2016. and what we have done is we're really spent a lot of energy investing not only in our headquarters in the u.s. but creating -- in the u.s. building infrastructure and driving partnerships along like dick's sporting goods or footwear.
so along the entire chain we're capable of investing and really winning. that you can see in our growth. we grew 30% in the u.s. it would double our footwear market share and we are making sense to the u.s. consumer. >> i know under armour's getting cheaper by the day, and you're focused on streamlining your business and selling off key brands. but would you ever look at an under armour as an acquisition target? >> you know, i don't think that -- you know, under armour has done a stellar job but we think we have the greatest brand in the industry. we have all that we want, so at this stage and also moving forward that is not a speculation. >> so let's talk about the u.s. a little bit more. do you worry at all with the new trump administration that an america first policy would put you at a competitive disadvantage being a german company that's trying to sell to american consumers? >> no. i don't think that's going to be relevant. the entire sporting goods industry is sourcing its products from asia. so it's god to be, you know, if tariffs will come, it will hit
the entire industry. i believe the sporting goods industry is good for any population because it's making lives more healthy. so that is not one of my primary concerns at this stage in the u.s. and i don't believe our industry will hit -- if it will hit we'll deal with it when we get there. >> you're talking about the border adjustment tax. is it possible to make sneakers and sport apparel in the united states? >> it depends if you're willing to pay a lot more for it. so if you're willing to ask the consumer to spend a lot more money paying on the products because there's no doubt that the reason why it's in asia today is more efficient process it is much more automated than we've ever seen before and of course labor rates are lower. so in theory you can move everything to the u.s., but of course you'll pay more for it. we believe with the introduction we have just opened a new manufacturing plant in atlanta, georgia. that of course will help serve a very small part of the market. but the primary, vast majority of the sporting goods markets will continue to be served.
>> are you talking about price increases double for sneakers, for instance? >> you know, i can't put a number on it, but i think it's highly unlikely. if you look that's not really what we're concerned about at this stage. we don't think the sporting goods industry is going to be the primary target of any government globally, whether it's the u.s., china or any european government. >> that was kasper rorsted, been on the job for six months taking over as ceo. the stock is a moon shot. adidas up 81% over the last 12 months. nike's down 5.5% during that time period and under armour down 53%, which is why i ask the acquisition question. some people sort of hope that that's maybe a scenario for under armour that adidas could swallow them up and really take on nike, but it doesn't sound like rorsted has any plans of doing that. >> man. that's quite a move. >> it's an amazing chart. look, partially they benefit
from the weaker euro because they are an exporter and they're based in germany. but they've got the trend. >> they've got the trend. i know my 14-year-old that's all i got to ask and he's suddenly talking adidas in the last few years. >> is he talking about easy? >> yeah. >> kanye west? >> yeah. he doesn't have any. >> it's very hard to get. >> right. >> it's that. ultraboost. >> it's like the releases. they release the sneakers and you can try and get them. >> yes, that's been going on at nike for awhile, but i think what adidas has tapped into is what i call it is retro sheichi. it's sort of athleisure and partnered with people like kanye unlike nike focused on athletes and that's certainly working right now when it comes to the trend. >> all right. well, when we come back, we're going to be talking about the border tax and trade. we'll speak with former morgan stanley asia chairman stephen roach. he'll tell us why he thinks the president is suffering from trade deficit disorder. plus, a new statue appearing in the financial district. it's a young girl standing up to the iconic bull of wall street,
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good morning everybody. i'm sue herera. here is your cnbc news update this hour. gunmen wearing white lab coats stormed a military hospital in kabul killing at least 30 and wounding dozens more. the islamic state group claiming responsibility. the attack set off clashes with security forces that lasted several hours. china's foreign minister urging south korea to suspend the deployment of the u.s. thaad missile system. he said the deployment was the wrong choice and biggest problem between china and south korea. 46,000 craftsman portable table saws sold exclusively at sears
are being recalled. there've been 11 reports of the table saws collapsing including nine reports of injuries to fingers and hands. they were sold at sears from april of 2014 through october of 2016. the price about $200. and the statue of liberty went dark last night for about 90 minutes. according to the national park service the outage was likely due to work on an emergency backup generator. little bit more work is probably needed there. that's the news update this hour. let's send it over to jackie deangelis with the eia inventory report. welcome back, jackie. >> thank you, sue. good morning to you. still negative but pairing losses. in terms of crude oil we saw a build of 8.2 million barrels. this is a big build, but not as big as what we've heard from the api last night. that's why the losses are pairing a little bit. and this report is mixed because gasoline inventories were down 6.6 million. digging into this report what's going to be important here,
imports. are they seeing their third week of declines? and what's happening with u.s. production. we were over 9 million barrels last week, do we continue to climb up from there? that's going to give this market a sense of which way it wants to go. most interesting thing to note, look at a one-month chart of crude oil prices. they're pretty much flat. tells you this is still a market that doesn't know if it wants to break out in either direction at this point. back to you at post nine. >> jackie, thank you so much. jackie deangelis. the president making an american first policy a corner stone of his administration, but what is the economic impact of closing off from global trade? joining us this morning stephen roach, yale university senior fellow, former morgan stanley chairman, discusses in the ft saying donald trump is suffering from trade deficit disorder. stephen, good to have you back. good morning. >> good to see you. >> you call this a symptom of deep denial, say bilateral solutions to this problem are a fantasy. you want to walk us through your central premise? >> we don't have, you know, one or two trade deficits that can
be dealt with by slapping around countries like china and mexico as the president and his trade advisors want you to believe. we have 101 deficits with over half the countries in the world. and this reflects the fact that we don't save as a nation. our overall savings rate of businesses, consumers and the government sector 3% against a historic norm of close to 6.5% soch so lacking in saving and wanting to grow, we have to import surplus savings from abroad, run mass i have balance of payments in multilateral trade deficits with 101 countries to attract the capital. so close down trade with one of those, for example, pick everybody's favorite whipping boy, china, and it's like a water balloon. the water just goes somewhere else and the deficits get distributed to our other trading partners, all of whom are higher cost producers which taxes american middle class consumers. >> is there nothing to worry about regarding trade deficits
in this country? >> no, there's -- it's a symptom of a much deeper problem. we can't keep harboring the fantasy that we can grow indefinitely without saving for the future. the trade deficits are a manifestation of our saving deficit. and for far too long we have harbored this delusion that we can grow by just borrowing savings from others like germany or japan or of course china. and, you know, one of these days that formula for false prosperity is going to be market to market. >> you make the point this invites what you call major policy blunders, destabilizing dislocations here and abroad. what would be an example of that? what are you afraid of? >> well, you know, the trump administration led by very poor
advice from the trade advisor peter navarro written a book called "death by china" wants to slap huge tariffs on china. there's a lot of things china does we don't like that we need to be tough in negotiating with, but if we hit them with tariffs, they'll reciprocate and put tariffs on us. and we could get into a global trade war. that would be very disruptive to global supply chains. it would, again, raise the price of goods sold at walmart, which by the way would be a huge tax on struggling american families who are having a hard time making ends meet. this is exactly the type of mindset that prevailed in the late 1920s and early 1930s when we passed smoot holly tariffs and that precipitated a global trade war which made a big recession into the great depression. >> but just to play devil's advocate here, steve, surely there's a balance where trade
deficits do subtract from our economic growth. so if you try to close them a little bit, get more american manufacturing sold abroad, you can add some jobs there, that surely could be a good thing in the short term versus sort of trying to tackle savings, which is much more daunting. >> sara, i guess what i'm trying to tell you is you can't do one without the other over the long run. if we try to lower, you know, one of our trade deficits, you know, pick your favorite -- >> how about mexico? $70 billion. >> okay. pick mexico. put up a wall and deal with the trade deficit that way. the mexican piece will go somewhere else if we don't address our savings deficit. so we're not going to solve the overall trade deficit. we're going to rearrange the deck chairs on the titanic. and that's not a way to practice good, sound macroeconomics. the trump administration doesn't have any economic advisors on
its team that really understand this. and that's a serious problem. >> you really believe that? there's nobody on the team who actually understands that? why do you think that's the case? >> well, look, i mean, where's the council of economic advisors? do we have anybody appointed to the council of economic advisors? are they going to be on the cabinet when they are appointed? this is the first time since the late 1940s when we don't have a council of economic advisors functioning in an analytical advisory capacity for a u.s. presidential administration. >> right. but we got a commerce secretary who seemingly understands what you're talking about, gary cohn certainly one would imagine might, as would mnuchin potentially at treasury. you don't agree? >> no, i don't, david. look, go read the white paper that was written by the purported economists of the trump administration last september co-authored by wilbur ross and peter navarro, who's now the director of the national
trade council. there's not one credible piece of economic analysis in that white paper. if that's indicative of the level of economic advice that the 45th president is getting, we're in serious trouble. >> well, kevin hasset is set to be appointed as the chair of the white house economic council. he does have respect in the industry, doesn't he, steve? >> god bless him. i hope he does well. i hope he gets the ear of the president. i hope he continues in a great tradition of providing rigorous sound analytical advice for the white house before they make a very serious mistake of historic consequences. >> stephen, when it comes to tax policy and of course tax reform and the border adjustment tax, do you sort of lump it in with this overall protectionist fervor? or is that a separate item in your belief? >> well, depends on the tax you're considering. if this border tax adjustment where you are providing incentives for exports but sharp
tax increases for imports again this raises a real flag analytically from my point of view. it harkens back to the types of protectionist actions we saw at a very dark point in our history. >> right, but the idea is of course to bring supply chains back to this country. is it something you think would be effective in doing that? and/or all of this talk about trying to reduce the trade deficit by means of bringing production back, do you think that can be successful and/or actually add to gdp growth? >> david, if we could bring everything back to america and restore the good old days, you know, that would certainly be an extraordinary accomplishment, but in a global economy with countries developing production capabilities repeatedly over the last several decades and
educating their lower wage workers to do the types of things we used to do, it's probably going to be difficult to reconstruct, you know, the america of the 1950s and 1960s without some herculean changes in our approach to economic and tax policy management. >> that remains an ongoing debate and two references now for that navarro-ross white paper in the same hour after larry mentioned it at the top of the hour. stephen, it's an important read. everybody should at least take a look at it. it's good to see you. thanks. >> good to see you. thank you. >> stephen roach. as we go to break, take a look at shares of h & r block, up 15%, smaller than expected loss, beats on the top line on a strong tax season. they traditionally only post a profit during the current quarter because of tax prep. when we come back, the ceo of state street's with us calling over 3,000 companies to increase the number of women in positions in corporate governance along with this stunning statue at the
state street global advisors calling on over 3,500 companies to increase the number of women on their corporate boards. the firm is also unveiling a statue of a young girl across from the iconic wall street bull representing the rise of female leadership. this all on international women's day. and for more we're joined by the president and ceo of state street global advisors, ronald o hanley, welcome, ronald. nice to see you. >> thanks very much. thanks for having me. >> so the statue is amazing. love the defiance that it shows. tell us a little bit about how this came together and how you got to put that on wall street. >> well, it came together in a number of ways. as part of our ongoing corporate
governance we've been focused more and more on the issue of gender diversity or lack thereof on boards as part of our overall stewardship and this was also the one-year anniversary of the launch of our gender diversity etf. so the thinking was let's bring this altogether when there's a lot of attention on it on this very important day. >> i know you're calling on companies to take steps here to increase gender diversity on the boards, ron, but are you willing to actually do something about it? in other words, get into proxy fights or vote, use your voting power as shareholders to make it happen? >> well, it's part of our overall stewardship and governance activities we definitely use our vote. in fact, if you're an index manager, it's the only tool you have to influence behavior. so as part of our active engagement with companies and boards, we'd certainly not like
it -- we prefer for it not to be adversarial but if it needs to be a vote, we will take the vote. again, for us it's not about quotas. it's really about this fact and it is a fact, the research is there, that gender diversity improves outcomes. so for us the question gets raised when we see a board that has no or very few women on it. >> which measurement do you use to signal that companies with more diverse boards are in better economic shape? is it a return on equity? what are you looking at? >> yeah, that's a very good question, right, because what we are focus ed on is more long tem return. we do look at return on equity. we look at all sorts of different return numbers but we look at it over the long term. because the short term numbers oftentimes there's too much noise. >> and what have you found in terms of how much work there still is to do at u.s. companies? which sectors are sort of best
practices here offer best practices and which ones have more work to do? >> well, i would say the good news is there's been a lot of progress here. and particularly across large companies it's not for lack of trying. and at the very largest companies there's actually for the most part an improving mix. but there's still a very large number of the russell 3000, almost a quarter, that have no women on boards. about 60% have 15% or less. and, again, there's no perfect answer for numbers but that is an indicator that probably we need to dig a little bit deeper and figure out why that is. it is true that certain sectors because they have not historically had women in their management ranks probably are not generating women candidates for boards. and as pipelines build though that should change. >> ron, pew has some information that 70 countries have now had a
female leader at some point in their history. some argue that the current cabinet in washington is overwhelmingly male. what responsibility does government have to set an example? >> you know, i think this all comes back to this concept of diversity of thought. and if you have a bunch of people around a table in an organization leading a group and you get this -- they all come from the same place, they all come from the same background, it's almost inevitable you get group think and not thinking about those things that might be improbable. so i think the same standards ought to apply to government. and again, it's not about a quo ta. it's saying do we really have sufficient diversity of thinking in this particular organization? >> ron, thanks for joining us to discuss your efforts here on this front. ron o hanley, state street advisor. thank you very much.
california fillon persist laurine powell jobs, the widow of steve jobs, arrived at the white house moments ago and eamon javers is live with that. >> reporter: hi, carl. what an intriguing meeting with lauren powell jobs, an act risk on immigration and more. i asked her what she would be talking about with the president, would she bring up both subjects? she said, i think i'll talk about both. so, we do know that's on the schedule at the white house, but she would apparently be on the opposite side of the president on so many of those issues, so we'll have to wait and see how this meeting goes, an intriguing one here at the white house today, carl. >> and a busy day for the president. other meetings as well with congressman cummings and the interior secretary, dinner with ted cruz and heidi cruz tonight. so we'll talk more about the president -- >> elon musk will be back here at the white house today as well. >> that's what reuters is
reporting. elon musk, yeah, for his third meeting at the white house. >> reporter: yeah, they'll be here. >> hyperloop could be a big piece of that. thanks, eamon. well, you may be checking your watches, saying wait a second, did i miss "the santelli exchange"? the answer's no! right now, here it is. not to worry. >> cool, thanks, david. i'd like to welcome my special midweek guest, daniel pianco. you're my student loan guy, daniel! thanks for taking the time. >> pleasure. >> listen, yesterday we had consumer credit come out. and when you look at some of the data, two things hit me from a general perspective -- overall, consumer credit hasn't reached precise levelrisis levels, and pretty well-behaved, but looking at student loans -- and we'll show the chart -- it's like a stairway to heaven. the government enables that financing, students grab it, and we create a dynamic that increases costs. listen, are we ever going to be
able to get at the enablers here? can we ever actually address this before it explodes? >> first of all, it is absolutely critical that any developed economy actually help their citizenry get access to higher education. it's the gateway to the middle class. it is absolutely imperative that we keep financing options in place for students. the problem is, our current student lending system nobody would defend because it's not set up correctly. and to your point, what it does is it basically encourages the underlying cost of college to continuously go up, which is why -- and this is what your viewers should really understand is that every quarter, until this gets changed, that student debt number is going to be going up, up, up to the right and going up about $30 billion a quarter, which is roughly what the numbers are this quarter. so, that's what we're looking forward to unless we have a change in how we actually operate this program. >> to make matters worse, we've
talked about this. you know, the $100 billion-plus miscalculation of the last administration in the waning days of 2016 calibrated all the repayments wrong! so, the problem's actually worse. finally, there's a bill recently proposed, hr-795, that if you have a lot of student debt, and most likely you're a bit in arrears, like many are, you get a job, your employer can help pay that for maybe some tax incentive. your final thought on that notion. >> yeah, this is probably one of those examples where it's great politics, probably bad policy. and you know, it gets back to, all right, how are we going to fix the underlying problem, which is to rein in college costs? and the problem with this bill is it effectively gives a subsidy to wealthier college graduates without actually encouraging colleges to cut their costs for the, you know, 50%, 60%, 70% of students who may not be graduating and getting those jobs. i give senator mike nzei a lot
of credit. he just sent another letter to the department of education saying, look, this is the people's money, we've got to be monitoring this correctly. >> daniel, we're going to have to leave it there and pick that up the next time, but thank you for clarifying that hr-795. and we're going to go back to sara. >> rick santelli, thank you very much. just a quick check on the markets. the s&p is barely positive, coming off of two back-to-back down days, first time since january for that. financials are in the lead. much more ahead. stay with us. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets
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welcome back to "squawk on the street." a quick market check here as bond yields rise on the back of that strong adp report. rate-sensitive sectors are getting hit. take a look at utilities, the worst-performing sector in today's trade, down more than 1%. nat gas prices also not helping the story as prices rise here, hitting a two-week high. big-percentage losers in the utility space, nrg energy, firstenergy, pinnacle west and sempra. carl, back to you. >> thank you, seema mody. good morning. it is 8:00 a.m. at